Housing crash deniers ???
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Greg ScottPro Member
Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votesThe market may correct, but I firmly believe there won't be a crash. The reason is simple, equity.
Before 2008 people with no income could get liars loans and buy much more real estate than they could afford. We heard stories of cleaning ladies buying multiple million dollar homes. When home prices starting falling, the whole thing collapses like a house of cards because nobody had any equity. They couldn't sell and get out. We had cascading foreclosures creating a downward spiral.
Recently, prices have been surging. Given the laws passed after the Great Recession, appraisals and lending is highly restricted. Appraisals have not been keeping up with prices and lenders won't lend above appraised value. We sold a house in 2021 and in one day had 20 offers. Several of them had acceleration clauses stating they would pay more than anyone else up to $X. Both of them waived any financing contingency because they KNEW the house wouldn't appraise for what they were offering. They had to make up the difference with cash. Those people have a ton of equity in their homes. If they had to sell, they might take a haircut, but they aren't going to get foreclosed.
There is no house of cards here to come tumbling down.
2904 Replies
- 3yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @Michael Wooldridge:
Quote from @James Hamling:
Quote from @Dan H.:
Quote from @James Hamling:
Quote from @Dan H.:
Quote from @Greg R.:
Quote from @Dan H.:
Quote from @Greg R.:
I don't know if we're going to see a drop in rents. However, I wouldn't be surprised if they did correct some. I don't have a ton of data to support this, just one personal example. My cousin moved out of CA recently and put his house on the market for $4,500 in early August. Definitely on the high side, but he should have been able to get 4k all day. However, he's now down to $3,550 and dying a slow death.Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
@Carlos Ptriawan rent data is messy as you pointed out earlier in this thread. ON an annualized basis which is what I was referencing it hasn't happened. Would love to zoom in on the dollars in that monthly swings refin one is there a link to the chart? Meanwhile annualized data from multiple sources:
OK understood, I use quarterly (short-term data) while you use long-term smoothed data, obviously, the result would be different.
I also want to point out, if 2019 data has the rent-to-income ratio as 20.1% but in 2022 it's 20.5%, the line is actually stagnant, there's no real actual rent increase although the $ seems to increase. that's just an adjustment to wage.Yep I'm just not concerned with short term shifts because every market/investment has it. I try and look at the trend over time.
As to the bolded section stagnation has happened. I would fully agree and go so far to say I expect it this coming year. But hte funny thing about inflation/wage adjustment:1) I've made that very argument as to one of the main reasons why rent won't drop next year. It's not that far off if you adjust for the last 12 months of wages and inflation.
2) my primary reason for calling out rents have never dropped annually is because of @John Carbone prediction that rents are going to drop and people will magically be hurting the next year for profits if they bought recently. Historically that has just not happened. Especially in such a good job market (and even 5% unemployment is good if the fed can even push it that high) and while inflation is happening.
This is a suburb of San Diego, not a lot of rental availability and rents are very high. I have rentals in the same city and every time I have a vacancy it's like a black Friday sale. Seemingly hoards people lined up around the block - a lot of them good A+ grade renters.
Rents San Diego county wide have continued going up even as RE prices have fallen. YOY in my market the rent appreciation has averaged over 10%. $4k was always high rent for that unit. Rentometer lists the average as $3450 based on six 4 BR comps. It also shows that the highest rent ever for that unit is the current rent.
This property has been owner occupied for almost 10 years, so there's no recent/ relevant rental history for this exact property. I agree that the original listing price was too high, but I've seen other similar properties go for around 4k. He is renting it furnished with an 80" TV. These kinds of prices have been common in East county over the last year. I'm a bit surprised he can't find a renter for $3,550
It was not clear to me that it was being rented furnished. I do not know how furnished affects LTR rates. If it is furnished, did they consider STR or MTR? we have local STRs that have done well, but they are not in El Cajon
as for those “comps”…. They are not comps as neither referenced is rented and the second has been listed over one month. The first has been listed at least 18 days. it has been years since one of my rentals took 18 days to rent. Comps have to have found tenants willing to pay the rent. Rentometer is fairly accurate and used 6 comps.
if the property is special, it can dictate rents far above the average rent but it has to have something making it special.Just getting into metrics for the year. My teams "median" listing time to lease is 14.66 days.
Since the covid showing restrictions were lifted, we have found a tenant on the first day of showing every time in San Diego. San Diego has a large rental shortage with associated low vacancy rate. However, we do not pull the listing until the tenant has placed a deposit to hold the unit. With our tenant check process, occasionally having to process more than one application due to tenant not meeting our criteria, and arranging to get the deposit, the listings usually are up over a week and sometime approach 2 weeks.
>18 days is long time in our market. Over 30 days is almost unheard of in residential (<5 units) rentals.
We have no units in El Cajon but we have quite a few units in escondido which would seem to be similar. Our only 4 BR is in bad need of rehab so the rent on our unit would not be a good comp (it is far less than $3500).
Very similar process and market in T.C..
Listing stays active until an accepted applicant posts funds to secure unit and take off market. 30+ days list time is bonkers, totally unheard of unless it's a ridiculous ask, which some have gotten into that zone of ridiculous greed, pressing for $3k mnth rents on a place that was $1,500 just 24-36 months ago. Or just leaving a place looking like hell with marked up stained walls, nasty carpets, a general film of funk all over, saying idiotic things like "well, it's a tight market, someone will take it as-is".
I don't allow those games to happen, I will fire a client. But other teams, I see them allowing all kinds of stupidity, and i don't know why, nobody wins in that case, it's a clear path to bad results.
A few months ago my team hit an all-time record of average list time being 72hrs, that includes time for deposit received. It was insane. I had prospective tenants calling breaking down into tears begging to be allowed to apply on a unit that had approved pending move-ins. Never seen anything like it, insanely tight market for unit supply.
This summer season is going to be even worse I think. People have to remember how many leases are multi year, so we didn't see the end of it this past season, which was record setting. With inventory even more tight, it's going to be another record setter.
@Dan H. @James Hamling interesting article on rents and realpage in big cities: https://www.propublica.org/art...
I think it is a novel theory, but let’s look at some items related to the San Diego RE market many of which apply to other markets. 1) home prices have increased far more than rents. This implies that rents require significant increase to get to historical normal price/rent ratio. 2) supply and demand. There is a very low vacancy rate due to rental shortage. 3) the market is geographically constrained. Mexico to the south, pacific to the west, Camp Pendleton to the north, and going east quickly becomes quite harsh. This limits future supply. 4) increasing regulations have increased risk. These regulations include rent control, cannot distinguish source of income, difficulty doing evictions, etc. Increased risk results in increased cost to compensate for the risk (in this case increased rents). 5) San Diego had the strictest covid eviction moratorium in the country (a new risk, never before identified). Tenant were allowed to break lease terms and not pay and could not be evicted (only evictions were for health and safety items). New risk results in the need for increased rents. 6) in part due to eviction moratorium and not being able to force rent payment, most rents were not raised the first year of covid and some were not raised the second year of covid. 7) some markets, but not the San Diego market as demand stayed high through covid, offered covid discounts. Some rents from tenants that initially rented during covid were artificially low. Most tenants knew this. Did they believe they would continue to get covid discount forever?
Or you can discount all the above reasons for significant rent increases and believe the significant rent increases are due to a tool knowing what units actually rented for versus only knowing the publicly available list price for the rental. Note in my market it is very rare for a tenant to request to negotiate on the rent as they know about the demand so the publicly available information matches the actual rent in virtually every case.
I will add that I do not believe residential RE is passive, but I want to make it fairly passive. I intentionally let my good tenant’s rents fall a little below market (in contrast I raise our poor tenant’s rent above market). If I was a larger rental owner, with teams available at all times to do tenant flips, maybe I would keep my good tenant’s rent at market. I am ok having a little less profit for not having the work involved in a tenant flip and avoiding the risk associated with placing a new tenant (no matter how good you screen, there is still risk placing a new tenant). Those using the tool are encouraged to always rent at what the tool determines current market rent.
- Member since 2022 · 485 posts · 216 votes3y
Quote from @Dan H.:
I think it is a novel theory, but let’s look at some items related to the San Diego RE market many of which apply to other markets. 1) home prices have increased far more than rents. This implies that rents require significant increase to get to historical normal price/rent ratio. 2) supply and demand. There is a very low vacancy rate due to rental shortage. 3) the market is geographically constrained. Mexico to the south, pacific to the west, Camp Pendleton to the north, and going east quickly becomes quite harsh. This limits future supply. 4) increasing regulations have increased risk. These regulations include rent control, cannot distinguish source of income, difficulty doing evictions, etc. Increased risk results in increased cost to compensate for the risk (in this case increased rents). 5) San Diego had the strictest covid eviction moratorium in the country (a new risk, never before identified). Tenant were allowed to break lease terms and not pay and could not be evicted (only evictions were for health and safety items). New risk results in the need for increased rents.
Or you can discount all the above reasons for significant rent increases and believe the significant rent increases are due to a tool knowing what units actually rented for versus only knowing the publicly available list price for the rental. Note in my market it is very rare for a tenant to request to negotiate on the rent as they know about the demand so the publicly available information matches the actual rent in virtually every case.
I will add that I do not believe residential RE is passive, but I want to make it fairly passive. I intentionally let my good tenant’s rents fall a little below market (in contrast I raise our poor tenant’s rent above market). If I was a larger rental owner, with teams available at all times to do tenant flips, maybe I would keep my good tenant’s rent at market. I am ok having a little less profit for not having the work involved in a tenant flip and avoiding the risk associated with placing a new tenant (no matter how good you screen, there is still risk placing a new tenant). Those using the tool are encouraged to always rent at what the tool determines current market rent.
I just found the article interesting more than anything. I’m familiar with the data science so I don’t doubt some of it is accurate. But I also think it’s more of removing the emotion out of it than the actual numbers going up from the pressure. The Seattle comparison was a really interesting one, where the manager not using data talks a LOT about what she “feels”. Obviously her feelings are wrong if neighboring rents have gone up such a big % but they have barely budgeted.
Anyway I see it as more supply and demand. By removing the emotion in iti people are able to just make it about supply. Sort of a chicken an egg search if you will.
Still if there is a large enough % using the tool in the cities and the leases are on file for say 70%. In theory the tool is driving rents higher by pricing every new unit even $5 bucks higher than the last unit list. If it’s happening to a large enough % of the rentals it would drive the price higher until it reaches a point the market can’t pay. Is thta market manipulation or basics law of supply and demand?
I don’t have an answer just find it interesting on many fronts.
- 3yDan H.Pro MemberInvestor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes
Quote from @Michael Wooldridge:
Quote from @Dan H.:
I think it is a novel theory, but let’s look at some items related to the San Diego RE market many of which apply to other markets. 1) home prices have increased far more than rents. This implies that rents require significant increase to get to historical normal price/rent ratio. 2) supply and demand. There is a very low vacancy rate due to rental shortage. 3) the market is geographically constrained. Mexico to the south, pacific to the west, Camp Pendleton to the north, and going east quickly becomes quite harsh. This limits future supply. 4) increasing regulations have increased risk. These regulations include rent control, cannot distinguish source of income, difficulty doing evictions, etc. Increased risk results in increased cost to compensate for the risk (in this case increased rents). 5) San Diego had the strictest covid eviction moratorium in the country (a new risk, never before identified). Tenant were allowed to break lease terms and not pay and could not be evicted (only evictions were for health and safety items). New risk results in the need for increased rents.
Or you can discount all the above reasons for significant rent increases and believe the significant rent increases are due to a tool knowing what units actually rented for versus only knowing the publicly available list price for the rental. Note in my market it is very rare for a tenant to request to negotiate on the rent as they know about the demand so the publicly available information matches the actual rent in virtually every case.
I will add that I do not believe residential RE is passive, but I want to make it fairly passive. I intentionally let my good tenant’s rents fall a little below market (in contrast I raise our poor tenant’s rent above market). If I was a larger rental owner, with teams available at all times to do tenant flips, maybe I would keep my good tenant’s rent at market. I am ok having a little less profit for not having the work involved in a tenant flip and avoiding the risk associated with placing a new tenant (no matter how good you screen, there is still risk placing a new tenant). Those using the tool are encouraged to always rent at what the tool determines current market rent.
I just found the article interesting more than anything. I’m familiar with the data science so I don’t doubt some of it is accurate. But I also think it’s more of removing the emotion out of it than the actual numbers going up from the pressure. The Seattle comparison was a really interesting one, where the manager not using data talks a LOT about what she “feels”. Obviously her feelings are wrong if neighboring rents have gone up such a big % but they have barely budgeted.
Anyway I see it as more supply and demand. By removing the emotion in iti people are able to just make it about supply. Sort of a chicken an egg search if you will.
Still if there is a large enough % using the tool in the cities and the leases are on file for say 70%. In theory the tool is driving rents higher by pricing every new unit even $5 bucks higher than the last unit list. If it’s happening to a large enough % of the rentals it would drive the price higher until it reaches a point the market can’t pay. Is thta market manipulation or basics law of supply and demand?
I don’t have an answer just find it interesting on many fronts.
I question if the Seattle LL referenced is like me and willing to have slightly lower rent for reduced effort (no tenant turn over) and reduced risk (the risk involved in placing a new tenant). I think those that choose to use the tool have decided the increased profit justifies the increased work and increased risk.
I suspect that if I kept my existing tenants at market rent, there would be little rent difference from what the tool would dictate as I use the various rent estimating tools (Rentometer, BP rent estimator, and Zillow rent estimator) as well as do a market survey. I suspect my market rent estimate is very close to what the tool would indicate. I choose to charge my existing good tenants less than market. I understand LL that decide to keep all rents at market rent; it is just a different decision that results in increased profit with increased work.
- Member since 2022 · 485 posts · 216 votes3y
Quote from @Dan H.:
Quote from @Michael Wooldridge:
Quote from @Dan H.:
I think it is a novel theory, but let’s look at some items related to the San Diego RE market many of which apply to other markets. 1) home prices have increased far more than rents. This implies that rents require significant increase to get to historical normal price/rent ratio. 2) supply and demand. There is a very low vacancy rate due to rental shortage. 3) the market is geographically constrained. Mexico to the south, pacific to the west, Camp Pendleton to the north, and going east quickly becomes quite harsh. This limits future supply. 4) increasing regulations have increased risk. These regulations include rent control, cannot distinguish source of income, difficulty doing evictions, etc. Increased risk results in increased cost to compensate for the risk (in this case increased rents). 5) San Diego had the strictest covid eviction moratorium in the country (a new risk, never before identified). Tenant were allowed to break lease terms and not pay and could not be evicted (only evictions were for health and safety items). New risk results in the need for increased rents.
Or you can discount all the above reasons for significant rent increases and believe the significant rent increases are due to a tool knowing what units actually rented for versus only knowing the publicly available list price for the rental. Note in my market it is very rare for a tenant to request to negotiate on the rent as they know about the demand so the publicly available information matches the actual rent in virtually every case.
I will add that I do not believe residential RE is passive, but I want to make it fairly passive. I intentionally let my good tenant’s rents fall a little below market (in contrast I raise our poor tenant’s rent above market). If I was a larger rental owner, with teams available at all times to do tenant flips, maybe I would keep my good tenant’s rent at market. I am ok having a little less profit for not having the work involved in a tenant flip and avoiding the risk associated with placing a new tenant (no matter how good you screen, there is still risk placing a new tenant). Those using the tool are encouraged to always rent at what the tool determines current market rent.
I just found the article interesting more than anything. I’m familiar with the data science so I don’t doubt some of it is accurate. But I also think it’s more of removing the emotion out of it than the actual numbers going up from the pressure. The Seattle comparison was a really interesting one, where the manager not using data talks a LOT about what she “feels”. Obviously her feelings are wrong if neighboring rents have gone up such a big % but they have barely budgeted.
Anyway I see it as more supply and demand. By removing the emotion in iti people are able to just make it about supply. Sort of a chicken an egg search if you will.
Still if there is a large enough % using the tool in the cities and the leases are on file for say 70%. In theory the tool is driving rents higher by pricing every new unit even $5 bucks higher than the last unit list. If it’s happening to a large enough % of the rentals it would drive the price higher until it reaches a point the market can’t pay. Is thta market manipulation or basics law of supply and demand?
I don’t have an answer just find it interesting on many fronts.
I question if the Seattle LL referenced is like me and willing to have slightly lower rent for reduced effort (no tenant turn over) and reduced risk (the risk involved in placing a new tenant). I think those that choose to use the tool have decided the increased profit justifies the increased work and increased risk.
I suspect that if I kept my existing tenants at market rent, there would be little rent difference from what the tool would dictate as I use the various rent estimating tools (Rentometer, BP rent estimator, and Zillow rent estimator) as well as do a market survey. I suspect my market rent estimate is very close to what the tool would indicate. I choose to charge my existing good tenants less than market. I understand LL that decide to keep all rents at market rent; it is just a different decision that results in increased profit with increased work.
Well considering the other items they reference in there it’s not accurate since occupancy on a few very large tennant examples might have dropped 1-2% but profits up 7-8%.
That said even the Seattle one is interesting the rest of city is up 30% but they haven’t budged. Why not go up 10% even? doubt your occupancy gets hit.
Anyway I have 3 traditional units in one specific block of condos. I’ve had one tennant in there 8 year and I’ve been pushing it up more each lease with no change. Still behind the other two properties but at a certain point it gets two cheap even in a non-rehab.
It’s a delicate balance but given the scope of use of the tool + the profits it’s obvious it works well. Is it too aggressive? Maybe but if profits are up 7-8% on long term thousands of units. The data doesn’t lie it works.
- Investor & Agent · Tulsa, OK · Member since 2016 · 1k+ posts · 1k+ votes3y
My stance on this is locally in my market, price reductions ARE HAPPENING… yes… but they are happening on ASKING prices… we have no data yet to support an actual decrease in value, simply sellers getting less than what they wished for.
Too many people I know have held their breath waiting for a crash. Yes overpaying during market heights could be considered a cardinal sin, assuming there was an overpaying for the property. But I’d also argue that hoping and praying for prices to come down and having some sort of wizard forecast ability to predict an actual crash is like me wishing gas was $0.89 per gallon like it was when I mowed yards as a kid and charged $6 per yard.
- Sunnyvale , CA · Member since 2017 · 373 posts · 362 votes3y
Over the last 12 years:
1) Demand has gone up
2) Supply has been slow
3) Rates have been really lowOutcome = Acceleration of home prices nationwide (High demand + low supply + low rates).
But now its a different world. "demographic demand" will stay strong and supply will stay low while rates are rising. That means while there will be a slowdown, the opportunity for a crash is not imminent. - Rental Property Investor · San Mateo, CA · Member since 2017 · 108 posts · 49 votes3y
Quote from @Sam Josh:
Over the last 12 years:
1) Demand has gone up
2) Supply has been slow
3) Rates have been really lowOutcome = Acceleration of home prices nationwide (High demand + low supply + low rates).
But now its a different world. "demographic demand" will stay strong and supply will stay low while rates are rising. That means while there will be a slowdown, the opportunity for a crash is not imminent.hello from San Mateo, CA. What/where are you buying right now?
- Real Estate Broker · Minneapolis, MN · Member since 2011 · 5k+ posts · 6k+ votes3y
Quote from @Dan H.:
Quote from @Michael Wooldridge:
Quote from @James Hamling:
Quote from @Dan H.:
Quote from @James Hamling:
Quote from @Dan H.:
Quote from @Greg R.:
Quote from @Dan H.:
Quote from @Greg R.:
I don't know if we're going to see a drop in rents. However, I wouldn't be surprised if they did correct some. I don't have a ton of data to support this, just one personal example. My cousin moved out of CA recently and put his house on the market for $4,500 in early August. Definitely on the high side, but he should have been able to get 4k all day. However, he's now down to $3,550 and dying a slow death.Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
@Carlos Ptriawan rent data is messy as you pointed out earlier in this thread. ON an annualized basis which is what I was referencing it hasn't happened. Would love to zoom in on the dollars in that monthly swings refin one is there a link to the chart? Meanwhile annualized data from multiple sources:
OK understood, I use quarterly (short-term data) while you use long-term smoothed data, obviously, the result would be different.
I also want to point out, if 2019 data has the rent-to-income ratio as 20.1% but in 2022 it's 20.5%, the line is actually stagnant, there's no real actual rent increase although the $ seems to increase. that's just an adjustment to wage.Yep I'm just not concerned with short term shifts because every market/investment has it. I try and look at the trend over time.
As to the bolded section stagnation has happened. I would fully agree and go so far to say I expect it this coming year. But hte funny thing about inflation/wage adjustment:1) I've made that very argument as to one of the main reasons why rent won't drop next year. It's not that far off if you adjust for the last 12 months of wages and inflation.
2) my primary reason for calling out rents have never dropped annually is because of @John Carbone prediction that rents are going to drop and people will magically be hurting the next year for profits if they bought recently. Historically that has just not happened. Especially in such a good job market (and even 5% unemployment is good if the fed can even push it that high) and while inflation is happening.
This is a suburb of San Diego, not a lot of rental availability and rents are very high. I have rentals in the same city and every time I have a vacancy it's like a black Friday sale. Seemingly hoards people lined up around the block - a lot of them good A+ grade renters.Rents San Diego county wide have continued going up even as RE prices have fallen. YOY in my market the rent appreciation has averaged over 10%. $4k was always high rent for that unit. Rentometer lists the average as $3450 based on six 4 BR comps. It also shows that the highest rent ever for that unit is the current rent.
This property has been owner occupied for almost 10 years, so there's no recent/ relevant rental history for this exact property. I agree that the original listing price was too high, but I've seen other similar properties go for around 4k. He is renting it furnished with an 80" TV. These kinds of prices have been common in East county over the last year. I'm a bit surprised he can't find a renter for $3,550
It was not clear to me that it was being rented furnished. I do not know how furnished affects LTR rates. If it is furnished, did they consider STR or MTR? we have local STRs that have done well, but they are not in El Cajon
as for those “comps”…. They are not comps as neither referenced is rented and the second has been listed over one month. The first has been listed at least 18 days. it has been years since one of my rentals took 18 days to rent. Comps have to have found tenants willing to pay the rent. Rentometer is fairly accurate and used 6 comps.
if the property is special, it can dictate rents far above the average rent but it has to have something making it special.Just getting into metrics for the year. My teams "median" listing time to lease is 14.66 days.
Since the covid showing restrictions were lifted, we have found a tenant on the first day of showing every time in San Diego. San Diego has a large rental shortage with associated low vacancy rate. However, we do not pull the listing until the tenant has placed a deposit to hold the unit. With our tenant check process, occasionally having to process more than one application due to tenant not meeting our criteria, and arranging to get the deposit, the listings usually are up over a week and sometime approach 2 weeks.
>18 days is long time in our market. Over 30 days is almost unheard of in residential (<5 units) rentals.
We have no units in El Cajon but we have quite a few units in escondido which would seem to be similar. Our only 4 BR is in bad need of rehab so the rent on our unit would not be a good comp (it is far less than $3500).
Very similar process and market in T.C..
Listing stays active until an accepted applicant posts funds to secure unit and take off market. 30+ days list time is bonkers, totally unheard of unless it's a ridiculous ask, which some have gotten into that zone of ridiculous greed, pressing for $3k mnth rents on a place that was $1,500 just 24-36 months ago. Or just leaving a place looking like hell with marked up stained walls, nasty carpets, a general film of funk all over, saying idiotic things like "well, it's a tight market, someone will take it as-is".
I don't allow those games to happen, I will fire a client. But other teams, I see them allowing all kinds of stupidity, and i don't know why, nobody wins in that case, it's a clear path to bad results.
A few months ago my team hit an all-time record of average list time being 72hrs, that includes time for deposit received. It was insane. I had prospective tenants calling breaking down into tears begging to be allowed to apply on a unit that had approved pending move-ins. Never seen anything like it, insanely tight market for unit supply.
This summer season is going to be even worse I think. People have to remember how many leases are multi year, so we didn't see the end of it this past season, which was record setting. With inventory even more tight, it's going to be another record setter.
@Dan H. @James Hamling interesting article on rents and realpage in big cities: https://www.propublica.org/art...
I think it is a novel theory, but let’s look at some items related to the San Diego RE market many of which apply to other markets. 1) home prices have increased far more than rents. This implies that rents require significant increase to get to historical normal price/rent ratio. 2) supply and demand. There is a very low vacancy rate due to rental shortage. 3) the market is geographically constrained. Mexico to the south, pacific to the west, Camp Pendleton to the north, and going east quickly becomes quite harsh. This limits future supply. 4) increasing regulations have increased risk. These regulations include rent control, cannot distinguish source of income, difficulty doing evictions, etc. Increased risk results in increased cost to compensate for the risk (in this case increased rents). 5) San Diego had the strictest covid eviction moratorium in the country (a new risk, never before identified). Tenant were allowed to break lease terms and not pay and could not be evicted (only evictions were for health and safety items). New risk results in the need for increased rents. 6) in part due to eviction moratorium and not being able to force rent payment, most rents were not raised the first year of covid and some were not raised the second year of covid. 7) some markets, but not the San Diego market as demand stayed high through covid, offered covid discounts. Some rents from tenants that initially rented during covid were artificially low. Most tenants knew this. Did they believe they would continue to get covid discount forever?
Or you can discount all the above reasons for significant rent increases and believe the significant rent increases are due to a tool knowing what units actually rented for versus only knowing the publicly available list price for the rental. Note in my market it is very rare for a tenant to request to negotiate on the rent as they know about the demand so the publicly available information matches the actual rent in virtually every case.
I will add that I do not believe residential RE is passive, but I want to make it fairly passive. I intentionally let my good tenant’s rents fall a little below market (in contrast I raise our poor tenant’s rent above market). If I was a larger rental owner, with teams available at all times to do tenant flips, maybe I would keep my good tenant’s rent at market. I am ok having a little less profit for not having the work involved in a tenant flip and avoiding the risk associated with placing a new tenant (no matter how good you screen, there is still risk placing a new tenant). Those using the tool are encouraged to always rent at what the tool determines current market rent.
I highly suggest instead of letting good tenants get sub-market prices, to make those rent increase BUT also give "good tenant Discount". This effects the same ends BUT, it can have terms that if/when those good tenant actions end, so does the discount. AND it's showing the tenant what your doing for them, it shows the appreciation, put's a dollar value to it. If you say to a tenant "oh, your great, i won't change your rents" what your saying is "I appreciate you so much that I reward you with the gift of nothing", because that's what it really is, NOTHING. So often a landlord will complain on something that went sour saying "and I was giving them this great deal on rents and it's like they just didnt care", yeah they didnt because they didnt see/ know/ experience what that deal is.
Try it, I guarantee that tenant will by 10X more pumped when you do it via discount method vs just doing nothing.
AND I also suggest for those good tenants, what I do is I also add in a referral offer that if they have someone they know who may "just as good a tenant" as they are, that They can earn a $100-$500 referral for those who lease. Good tenants are a great pipeline for good tenants. Given then $ up-front and then at 1yr good renting experience is remainder. I have never had this policy bite me, but as said I only offer it to select tenants. Ones I want to replicate.
- Realtor · Gatlinburg · Member since 2020 · 1k+ posts · 957 votes3y
Quote from @James Hamling:
Quote from @Dan H.:
Quote from @Michael Wooldridge:
Quote from @James Hamling:
Quote from @Dan H.:
Quote from @James Hamling:
Quote from @Dan H.:
Quote from @Greg R.:
Quote from @Dan H.:
Quote from @Greg R.:
I don't know if we're going to see a drop in rents. However, I wouldn't be surprised if they did correct some. I don't have a ton of data to support this, just one personal example. My cousin moved out of CA recently and put his house on the market for $4,500 in early August. Definitely on the high side, but he should have been able to get 4k all day. However, he's now down to $3,550 and dying a slow death.Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
@Carlos Ptriawan rent data is messy as you pointed out earlier in this thread. ON an annualized basis which is what I was referencing it hasn't happened. Would love to zoom in on the dollars in that monthly swings refin one is there a link to the chart? Meanwhile annualized data from multiple sources:
OK understood, I use quarterly (short-term data) while you use long-term smoothed data, obviously, the result would be different.
I also want to point out, if 2019 data has the rent-to-income ratio as 20.1% but in 2022 it's 20.5%, the line is actually stagnant, there's no real actual rent increase although the $ seems to increase. that's just an adjustment to wage.Yep I'm just not concerned with short term shifts because every market/investment has it. I try and look at the trend over time.
As to the bolded section stagnation has happened. I would fully agree and go so far to say I expect it this coming year. But hte funny thing about inflation/wage adjustment:1) I've made that very argument as to one of the main reasons why rent won't drop next year. It's not that far off if you adjust for the last 12 months of wages and inflation.
2) my primary reason for calling out rents have never dropped annually is because of @John Carbone prediction that rents are going to drop and people will magically be hurting the next year for profits if they bought recently. Historically that has just not happened. Especially in such a good job market (and even 5% unemployment is good if the fed can even push it that high) and while inflation is happening.
This is a suburb of San Diego, not a lot of rental availability and rents are very high. I have rentals in the same city and every time I have a vacancy it's like a black Friday sale. Seemingly hoards people lined up around the block - a lot of them good A+ grade renters.Rents San Diego county wide have continued going up even as RE prices have fallen. YOY in my market the rent appreciation has averaged over 10%. $4k was always high rent for that unit. Rentometer lists the average as $3450 based on six 4 BR comps. It also shows that the highest rent ever for that unit is the current rent.
This property has been owner occupied for almost 10 years, so there's no recent/ relevant rental history for this exact property. I agree that the original listing price was too high, but I've seen other similar properties go for around 4k. He is renting it furnished with an 80" TV. These kinds of prices have been common in East county over the last year. I'm a bit surprised he can't find a renter for $3,550
It was not clear to me that it was being rented furnished. I do not know how furnished affects LTR rates. If it is furnished, did they consider STR or MTR? we have local STRs that have done well, but they are not in El Cajon
as for those “comps”…. They are not comps as neither referenced is rented and the second has been listed over one month. The first has been listed at least 18 days. it has been years since one of my rentals took 18 days to rent. Comps have to have found tenants willing to pay the rent. Rentometer is fairly accurate and used 6 comps.
if the property is special, it can dictate rents far above the average rent but it has to have something making it special.Just getting into metrics for the year. My teams "median" listing time to lease is 14.66 days.
Since the covid showing restrictions were lifted, we have found a tenant on the first day of showing every time in San Diego. San Diego has a large rental shortage with associated low vacancy rate. However, we do not pull the listing until the tenant has placed a deposit to hold the unit. With our tenant check process, occasionally having to process more than one application due to tenant not meeting our criteria, and arranging to get the deposit, the listings usually are up over a week and sometime approach 2 weeks.
>18 days is long time in our market. Over 30 days is almost unheard of in residential (<5 units) rentals.
We have no units in El Cajon but we have quite a few units in escondido which would seem to be similar. Our only 4 BR is in bad need of rehab so the rent on our unit would not be a good comp (it is far less than $3500).
Very similar process and market in T.C..
Listing stays active until an accepted applicant posts funds to secure unit and take off market. 30+ days list time is bonkers, totally unheard of unless it's a ridiculous ask, which some have gotten into that zone of ridiculous greed, pressing for $3k mnth rents on a place that was $1,500 just 24-36 months ago. Or just leaving a place looking like hell with marked up stained walls, nasty carpets, a general film of funk all over, saying idiotic things like "well, it's a tight market, someone will take it as-is".
I don't allow those games to happen, I will fire a client. But other teams, I see them allowing all kinds of stupidity, and i don't know why, nobody wins in that case, it's a clear path to bad results.
A few months ago my team hit an all-time record of average list time being 72hrs, that includes time for deposit received. It was insane. I had prospective tenants calling breaking down into tears begging to be allowed to apply on a unit that had approved pending move-ins. Never seen anything like it, insanely tight market for unit supply.
This summer season is going to be even worse I think. People have to remember how many leases are multi year, so we didn't see the end of it this past season, which was record setting. With inventory even more tight, it's going to be another record setter.
@Dan H. interesting article on rents and realpage in big cities: https://www.propublica.org/art...
I think it is a novel theory, but let’s look at some items related to the San Diego RE market many of which apply to other markets. 1) home prices have increased far more than rents. This implies that rents require significant increase to get to historical normal price/rent ratio. 2) supply and demand. There is a very low vacancy rate due to rental shortage. 3) the market is geographically constrained. Mexico to the south, pacific to the west, Camp Pendleton to the north, and going east quickly becomes quite harsh. This limits future supply. 4) increasing regulations have increased risk. These regulations include rent control, cannot distinguish source of income, difficulty doing evictions, etc. Increased risk results in increased cost to compensate for the risk (in this case increased rents). 5) San Diego had the strictest covid eviction moratorium in the country (a new risk, never before identified). Tenant were allowed to break lease terms and not pay and could not be evicted (only evictions were for health and safety items). New risk results in the need for increased rents. 6) in part due to eviction moratorium and not being able to force rent payment, most rents were not raised the first year of covid and some were not raised the second year of covid. 7) some markets, but not the San Diego market as demand stayed high through covid, offered covid discounts. Some rents from tenants that initially rented during covid were artificially low. Most tenants knew this. Did they believe they would continue to get covid discount forever?
Or you can discount all the above reasons for significant rent increases and believe the significant rent increases are due to a tool knowing what units actually rented for versus only knowing the publicly available list price for the rental. Note in my market it is very rare for a tenant to request to negotiate on the rent as they know about the demand so the publicly available information matches the actual rent in virtually every case.
I will add that I do not believe residential RE is passive, but I want to make it fairly passive. I intentionally let my good tenant’s rents fall a little below market (in contrast I raise our poor tenant’s rent above market). If I was a larger rental owner, with teams available at all times to do tenant flips, maybe I would keep my good tenant’s rent at market. I am ok having a little less profit for not having the work involved in a tenant flip and avoiding the risk associated with placing a new tenant (no matter how good you screen, there is still risk placing a new tenant). Those using the tool are encouraged to always rent at what the tool determines current market rent.
I highly suggest instead of letting good tenants get sub-market prices, to make those rent increase BUT also give "good tenant Discount". This effects the same ends BUT, it can have terms that if/when those good tenant actions end, so does the discount. AND it's showing the tenant what your doing for them, it shows the appreciation, put's a dollar value to it. If you say to a tenant "oh, your great, i won't change your rents" what your saying is "I appreciate you so much that I reward you with the gift of nothing", because that's what it really is, NOTHING. So often a landlord will complain on something that went sour saying "and I was giving them this great deal on rents and it's like they just didnt care", yeah they didnt because they didnt see/ know/ experience what that deal is.
Try it, I guarantee that tenant will by 10X more pumped when you do it via discount method vs just doing nothing.
AND I also suggest for those good tenants, what I do is I also add in a referral offer that if they have someone they know who may "just as good a tenant" as they are, that They can earn a $100-$500 referral for those who lease. Good tenants are a great pipeline for good tenants. Given then $ up-front and then at 1yr good renting experience is remainder. I have never had this policy bite me, but as said I only offer it to select tenants. Ones I want to replicate.
Now this is the type of writing I expect from a top realtor. I think James is off the acid now.
- 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOPThanks Maya. I only preformed a quick CL search to find that one.
Quote from @Maya Gorski:
Quote from @Carlos Ptriawan:
Quote from @Maya Gorski:
Quote from @Dan H.:
Quote from @Greg R.:
Quote from @Dan H.:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
Just wanted to point out that there are 2-3 per day that are labeled as "reduced" but we don't actually know if they're really being reduced, and if one looks at the pictures we see that a lot of them are just complexes repeatedly advertising. Also, that Rolando one is a scam (it's Craigslist after all)--it's actually for rent for $2990:
- 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOPI wouldn't put a lot of stock in this. According to this some of the areas experiencing a decline right now are going to be experiencing price growth in a year.
Quote from @Michael Wooldridge:
Funny this just popped up: https://fortune.com/2022/10/15...
Shows May - august home value trends.
- Member since 2022 · 485 posts · 216 votes3y
Quote from @Greg R.:
I wouldn't put a lot of stock in this. According to this some of the areas experiencing a decline right now are going to be experiencing price growth in a year.Quote from @Michael Wooldridge:
Funny this just popped up: https://fortune.com/2022/10/15...
Shows May - august home value trends.
IF rates / inflation slow it woudln’t shock me for some of the towns that lost. It’s almost ike people don’t realize our money goes 9% less just about. If homes drop say 20% because of rates. By the time rates bounce back and between inflation we could see some upward movement.
Especially since it’s talking about 1.5%.
Like I said short of Florida collapsing. Which the hurricane likely made impossible. I don’t see the national adjustments predicted by your or John. So 1.5% grwoth sometime in next year sounds far more feasible to me than you.
- 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOP
Quote from @Michael Wooldridge:
Quote from @Greg R.:
I wouldn't put a lot of stock in this. According to this some of the areas experiencing a decline right now are going to be experiencing price growth in a year.Quote from @Michael Wooldridge:
@John Carbone
Funny this just popped up: https://fortune.com/2022/10/15...
Shows May - august home value trends.
IF rates / inflation slow it woudln’t shock me for some of the towns that lost. It’s almost ike people don’t realize our money goes 9% less just about. If homes drop say 20% because of rates. By the time rates bounce back and between inflation we could see some upward movement.
Especially since it’s talking about 1.5%.
Like I said short of Florida collapsing. Which the hurricane likely made impossible. I don’t see the national adjustments predicted by your or John. So 1.5% grwoth sometime in next year sounds far more feasible to me than you.
The problem with this train of thought is that you are expecting a very quick crash and rebound. The housing market isn't like the stock market. When it declines and hits bottom, the rebound is very slow - usually multiple years.
- Member since 2022 · 485 posts · 216 votes3y
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
I wouldn't put a lot of stock in this. According to this some of the areas experiencing a decline right now are going to be experiencing price growth in a year.Quote from @Michael Wooldridge:
@John Carbone
Funny this just popped up: https://fortune.com/2022/10/15...
Shows May - august home value trends.
IF rates / inflation slow it woudln’t shock me for some of the towns that lost. It’s almost ike people don’t realize our money goes 9% less just about. If homes drop say 20% because of rates. By the time rates bounce back and between inflation we could see some upward movement.
Especially since it’s talking about 1.5%.
Like I said short of Florida collapsing. Which the hurricane likely made impossible. I don’t see the national adjustments predicted by your or John. So 1.5% grwoth sometime in next year sounds far more feasible to me than you.
The problem with this train of thought is that you are expecting a very quick crash and rebound. The housing market isn't like the stock market. When it declines and hits bottom, the rebound is very slow - usually multiple years.
No the problem with it is that I'm not expecting a crash. I'm expecting a correction. And housing not being like he markets is why I like it. you end up with incredibly predictable ranges of lows and highs which is wonderful for making money long term.
Now let be very clear over the last month I've stated the following:
1) Market's won't crash it will be correction.
2) Region matters. East vs West coast is not at all comparable. West will see bigger swings due to rate impacts.
3) Inventory will stay low as people hold on to their homes and more importantly rates.
4) if Florida doesn't crash, with the Northeast staying strong, along with relatively flat Carolinas - then it's pretty much impossible for anything comparable to 08 on the national level. Florida has to happen from a sheer volume perspective.
5) I said layoffs would happen in Q4 but they would not be as big as we've seen in the past people are too worried about talent and with baby boomers retiring the job market will be harder to hit than the Fed expects.
Since those comments the following has happened:
1) Carlos and other have posted data showing West Coast is dropping but not the East Coast.
2) Hurricane happened which destroyed lots of homes in Florida. It didn't look like that market as going to drop but it sure won't now.
3) Lay offs happening and yet as per September reports we actually lowered at unemployment.
4) Most important even in the bay area Inventory remains down. People are sitting in their homes with really low rates waiting it out.
Also lets be clear 1.5 appreciation next year from this years lows (which we will see over October-December). Is a nominal average increase. So no it's not a rebound it's just growth over 12 months (2023) from where we end in Q4. It's a very reasonable appreciation level and guess what if inflation is on track to reset it will probably match when they start lowering rates in the second half of 2023. Slight growth after housing and inventory stagnates.
The real problem here is that it's looking like it's a correction not a crash which some of us have been predicting. It's. also not much of a rebound when no movement really happens for 12 months or so but as rates change people will buy again or the 1.5% appreciation..... - Member since 2019 · 7k+ posts · 4k+ votes3y
Dan, please correct me if I'm wrong. I guess the biggest employer in San Diego is the US Naval base, right?
Do you know how they could afford to live in San Diego with such high costs/rent ? Is there gov. subsidy/housing for them? - Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
I wouldn't put a lot of stock in this. According to this some of the areas experiencing a decline right now are going to be experiencing price growth in a year.Quote from @Michael Wooldridge:
@John Carbone
Funny this just popped up: https://fortune.com/2022/10/15...
Shows May - august home value trends.
IF rates / inflation slow it woudln’t shock me for some of the towns that lost. It’s almost ike people don’t realize our money goes 9% less just about. If homes drop say 20% because of rates. By the time rates bounce back and between inflation we could see some upward movement.
Especially since it’s talking about 1.5%.
Like I said short of Florida collapsing. Which the hurricane likely made impossible. I don’t see the national adjustments predicted by your or John. So 1.5% grwoth sometime in next year sounds far more feasible to me than you.
The problem with this train of thought is that you are expecting a very quick crash and rebound. The housing market isn't like the stock market. When it declines and hits bottom, the rebound is very slow - usually multiple years.
No the problem with it is that I'm not expecting a crash. I'm expecting a correction. And housing not being like he markets is why I like it. you end up with incredibly predictable ranges of lows and highs which is wonderful for making money long term.
Now let be very clear over the last month I've stated the following:
1) Market's won't crash it will be correction.
2) Region matters. East vs West coast is not at all comparable. West will see bigger swings due to rate impacts.
3) Inventory will stay low as people hold on to their homes and more importantly rates.
4) if Florida doesn't crash, with the Northeast staying strong, along with relatively flat Carolinas - then it's pretty much impossible for anything comparable to 08 on the national level. Florida has to happen from a sheer volume perspective.
5) I said layoffs would happen in Q4 but they would not be as big as we've seen in the past people are too worried about talent and with baby boomers retiring the job market will be harder to hit than the Fed expects.
Since those comments the following has happened:
1) Carlos and other have posted data showing West Coast is dropping but not the East Coast.
2) Hurricane happened which destroyed lots of homes in Florida. It didn't look like that market as going to drop but it sure won't now.
3) Lay offs happening and yet as per September reports we actually lowered at unemployment.
4) Most important even in the bay area Inventory remains down. People are sitting in their homes with really low rates waiting it out.
Also lets be clear 1.5 appreciation next year from this years lows (which we will see over October-December). Is a nominal average increase. So no it's not a rebound it's just growth over 12 months (2023) from where we end in Q4. It's a very reasonable appreciation level and guess what if inflation is on track to reset it will probably match when they start lowering rates in the second half of 2023. Slight growth after housing and inventory stagnates.
The real problem here is that it's looking like it's a correction not a crash which some of us have been predicting. It's. also not much of a rebound when no movement really happens for 12 months or so but as rates change people will buy again or the 1.5% appreciation.....One thing I've to agree with Michael is that the rebound after any price correction would be quick/maybe super quick.
With this reduced level of inventory like this, I expect mild price adjustment only to the long-term appreciation line.
CPI would drop 2% according to JPM in February, the increase of inventory from a seasonality basis is up starting from Feb-March only.
And the fact the Fed most likely going to restart mild QE next month by adding liquidity due to the bond market--it just means the Fed going to avoid any crashes from behind the table. - Member since 2022 · 485 posts · 216 votes3y
Quote from @Carlos Ptriawan:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
I wouldn't put a lot of stock in this. According to this some of the areas experiencing a decline right now are going to be experiencing price growth in a year.Quote from @Michael Wooldridge:
@John Carbone
Funny this just popped up: https://fortune.com/2022/10/15...
Shows May - august home value trends.
IF rates / inflation slow it woudln’t shock me for some of the towns that lost. It’s almost ike people don’t realize our money goes 9% less just about. If homes drop say 20% because of rates. By the time rates bounce back and between inflation we could see some upward movement.
Especially since it’s talking about 1.5%.
Like I said short of Florida collapsing. Which the hurricane likely made impossible. I don’t see the national adjustments predicted by your or John. So 1.5% grwoth sometime in next year sounds far more feasible to me than you.
The problem with this train of thought is that you are expecting a very quick crash and rebound. The housing market isn't like the stock market. When it declines and hits bottom, the rebound is very slow - usually multiple years.
No the problem with it is that I'm not expecting a crash. I'm expecting a correction. And housing not being like he markets is why I like it. you end up with incredibly predictable ranges of lows and highs which is wonderful for making money long term.
Now let be very clear over the last month I've stated the following:
1) Market's won't crash it will be correction.
2) Region matters. East vs West coast is not at all comparable. West will see bigger swings due to rate impacts.
3) Inventory will stay low as people hold on to their homes and more importantly rates.
4) if Florida doesn't crash, with the Northeast staying strong, along with relatively flat Carolinas - then it's pretty much impossible for anything comparable to 08 on the national level. Florida has to happen from a sheer volume perspective.
5) I said layoffs would happen in Q4 but they would not be as big as we've seen in the past people are too worried about talent and with baby boomers retiring the job market will be harder to hit than the Fed expects.
Since those comments the following has happened:
1) Carlos and other have posted data showing West Coast is dropping but not the East Coast.
2) Hurricane happened which destroyed lots of homes in Florida. It didn't look like that market as going to drop but it sure won't now.
3) Lay offs happening and yet as per September reports we actually lowered at unemployment.
4) Most important even in the bay area Inventory remains down. People are sitting in their homes with really low rates waiting it out.
Also lets be clear 1.5 appreciation next year from this years lows (which we will see over October-December). Is a nominal average increase. So no it's not a rebound it's just growth over 12 months (2023) from where we end in Q4. It's a very reasonable appreciation level and guess what if inflation is on track to reset it will probably match when they start lowering rates in the second half of 2023. Slight growth after housing and inventory stagnates.
The real problem here is that it's looking like it's a correction not a crash which some of us have been predicting. It's. also not much of a rebound when no movement really happens for 12 months or so but as rates change people will buy again or the 1.5% appreciation.....One thing I've to agree with Michael is that the rebound after any price correction would be quick/maybe super quick.
With this reduced level of inventory like this, I expect mild price adjustment only to the long-term appreciation line.
CPI would drop 2% according to JPM in February, the increase of inventory from a seasonality basis is up starting from Feb-March only.
And the fact the Fed most likely going to restart mild QE next month by adding liquidity due to the bond market--it just means the Fed going to avoid any crashes from behind the table.And lets be clear even if housing drops 3-6% in Q1 ( I suspect lower) ended at 1.5% appreciation is not a huge increase and completely easy to do if rates drop back to 5% before end of year. It's even easier if housing stays flat in q1/q2 which I expect.
- Member since 2019 · 7k+ posts · 4k+ votes3y
Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
And lets be clear even if housing drops 3-6% in Q1 ( I suspect lower) ended at 1.5% appreciation is not a huge increase and completely easy to do if rates drop back to 5% before end of year. It's even easier if housing stays flat in q1/q2 which I expect.
Yea , looks like it will be mild reduced or flat lines like GS predicted.
Btw the Fed already did a "mini light pivot" in the market today. In this situation, it's more exciting to see/analyze Fed's Repo/Reverse Repo actions. The future is easier to understand from what they actually do in the background.
It's very confusing when what they say and what they do in the back is not matching LOL..... this is fun to watch. - 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOPRegarding FL and the hurricane, do you have any data as to how many homes were destroyed? I saw one article claiming 5,000, but I didn't see a source for the data. According to this data: https://www.infoplease.com/us/...
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Since those comments the following has happened:
1) Carlos and other have posted data showing West Coast is dropping but not the East Coast.
2) Hurricane happened which destroyed lots of homes in Florida. It didn't look like that market as going to drop but it sure won't now.
3) Lay offs happening and yet as per September reports we actually lowered at unemployment.
4) Most important even in the bay area Inventory remains down. People are sitting in their homes with really low rates waiting it out.
Also lets be clear 1.5 appreciation next year from this years lows (which we will see over October-December). Is a nominal average increase. So no it's not a rebound it's just growth over 12 months (2023) from where we end in Q4. It's a very reasonable appreciation level and guess what if inflation is on track to reset it will probably match when they start lowering rates in the second half of 2023. Slight growth after housing and inventory stagnates.
The real problem here is that it's looking like it's a correction not a crash which some of us have been predicting. It's. also not much of a rebound when no movement really happens for 12 months or so but as rates change people will buy again or the 1.5% appreciation.....
there are over 7 million total housing units in the state. Florida is a massive state with a ton of homes. Even if ten times the amount that I saw earlier were destroyed (50k), that's about 0.7% of the total housing inventory in the state.
I don't have a stance on this one way or the other, just trying to understand where you're coming from. - Member since 2022 · 485 posts · 216 votes3y
Quote from @Greg R.:
Regarding FL and the hurricane, do you have any data as to how many homes were destroyed? I saw one article claiming 5,000, but I didn't see a source for the data. According to this data: https://www.infoplease.com/us/...Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Since those comments the following has happened:
1) Carlos and other have posted data showing West Coast is dropping but not the East Coast.
2) Hurricane happened which destroyed lots of homes in Florida. It didn't look like that market as going to drop but it sure won't now.
3) Lay offs happening and yet as per September reports we actually lowered at unemployment.
4) Most important even in the bay area Inventory remains down. People are sitting in their homes with really low rates waiting it out.
Also lets be clear 1.5 appreciation next year from this years lows (which we will see over October-December). Is a nominal average increase. So no it's not a rebound it's just growth over 12 months (2023) from where we end in Q4. It's a very reasonable appreciation level and guess what if inflation is on track to reset it will probably match when they start lowering rates in the second half of 2023. Slight growth after housing and inventory stagnates.
The real problem here is that it's looking like it's a correction not a crash which some of us have been predicting. It's. also not much of a rebound when no movement really happens for 12 months or so but as rates change people will buy again or the 1.5% appreciation.....
there are over 7 million total housing units in the state. Florida is a massive state with a ton of homes. Even if ten times the amount that I saw earlier were destroyed (50k), that's about 0.7% of the total housing inventory in the state.
I don't have a stance on this one way or the other, just trying to understand where you're coming from.Busy work day today. so Last data I saw on the West Coast was 8,000 which is significant in that soutwest part of Florida (Fort Meyers). Q1 2021 they saw 6500 housing starts (which in itself was 35% year over year it's fastest growing area in FL). Lee County (Ft Meyers prime storm path) saw 2,000 homes all of last year built. When you talk about destroying a years worth of new construction it's significant. When you talk about the fact that there was already a shortage, folks that were using the west coat market will shift east coast on short term rentals (pushing up rent prices) and the construction will move west coast to rebuilt (which slows east coast build). This all has a domino effect.
It's not large enough on it's own to stop the market but it has a big swing when you talk about putting a larger crunch on a already low inventory market. ON top of that restrictions have gone up on insurance again. So some of that new construction will now apply to perfectly good homes that need new roofs to be insured or they won't be sellable.
Anyway domino effect. FL was never going to have a huge turn in my opinion but IAN just makes it even harder. - Member since 2022 · 485 posts · 216 votes3y
Quote from @Carlos Ptriawan:
Quote from @Michael Wooldridge:
Quote from @Carlos Ptriawan:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
And lets be clear even if housing drops 3-6% in Q1 ( I suspect lower) ended at 1.5% appreciation is not a huge increase and completely easy to do if rates drop back to 5% before end of year. It's even easier if housing stays flat in q1/q2 which I expect.
Yea , looks like it will be mild reduced or flat lines like GS predicted.
Btw the Fed already did a "mini light pivot" in the market today. In this situation, it's more exciting to see/analyze Fed's Repo/Reverse Repo actions. The future is easier to understand from what they actually do in the background.
It's very confusing when what they say and what they do in the back is not matching LOL..... this is fun to watch.Had a very busy day. what happened today with the Fed? Still getting caught up.
- 3yGreg R.Investor · Dallas, TX · Member since 2016 · 887 posts · 1k+ votesOP
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Regarding FL and the hurricane, do you have any data as to how many homes were destroyed? I saw one article claiming 5,000, but I didn't see a source for the data. According to this data: https://www.infoplease.com/us/...Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Since those comments the following has happened:
1) Carlos and other have posted data showing West Coast is dropping but not the East Coast.
2) Hurricane happened which destroyed lots of homes in Florida. It didn't look like that market as going to drop but it sure won't now.
3) Lay offs happening and yet as per September reports we actually lowered at unemployment.
4) Most important even in the bay area Inventory remains down. People are sitting in their homes with really low rates waiting it out.
Also lets be clear 1.5 appreciation next year from this years lows (which we will see over October-December). Is a nominal average increase. So no it's not a rebound it's just growth over 12 months (2023) from where we end in Q4. It's a very reasonable appreciation level and guess what if inflation is on track to reset it will probably match when they start lowering rates in the second half of 2023. Slight growth after housing and inventory stagnates.
The real problem here is that it's looking like it's a correction not a crash which some of us have been predicting. It's. also not much of a rebound when no movement really happens for 12 months or so but as rates change people will buy again or the 1.5% appreciation.....
there are over 7 million total housing units in the state. Florida is a massive state with a ton of homes. Even if ten times the amount that I saw earlier were destroyed (50k), that's about 0.7% of the total housing inventory in the state.
I don't have a stance on this one way or the other, just trying to understand where you're coming from.Busy work day today. so Last data I saw on the West Coast was 8,000 which is significant in that soutwest part of Florida (Fort Meyers). Q1 2021 they saw 6500 housing starts (which in itself was 35% year over year it's fastest growing area in FL). Lee County (Ft Meyers prime storm path) saw 2,000 homes all of last year built. When you talk about destroying a years worth of new construction it's significant. When you talk about the fact that there was already a shortage, folks that were using the west coat market will shift east coast on short term rentals (pushing up rent prices) and the construction will move west coast to rebuilt (which slows east coast build). This all has a domino effect.
It's not large enough on it's own to stop the market but it has a big swing when you talk about putting a larger crunch on a already low inventory market. ON top of that restrictions have gone up on insurance again. So some of that new construction will now apply to perfectly good homes that need new roofs to be insured or they won't be sellable.
Anyway domino effect. FL was never going to have a huge turn in my opinion but IAN just makes it even harder.Ummm, not seeing it that way, at all. I understand it's a significant event in the local housing economy (immediate and nearby areas), but 8,000 homes is 0.1% of the housing in the state. Literally one tenth of one percent of homes in the state. But this event has the potential to swing the entire state market one way? That would assume that all these people would turn into immediate buyers who are qualified, have the money, and can afford at current rates and prices... we all know that's not how it works.
On the other hand you have 7% rates that impact 100% of all finance home buyers. So, one event that impacts one tenth of 1%, and another variable that impacts 100% of finance home buyers. Affordability is the elephant in the room that we can't escape. Look at median home prices 1 year ago with rates from one year ago compared to median prices right now with the rates right now. It's a huge difference.
It's a massive stretch to to claim that the hurricane (as devastating as it was), is somehow going to keep the entire state housing market from a crash that it would have experienced otherwise.
If your position was that it wasn't going to crash either way, that's fine. But I respectfully disagree.
I think it's entirely likely that FL will crash. FL experienced a very high rate of migration with some of the highest inflated home prices in the nation. My position is that the areas that experienced the highest level of migration and home value inflation will have the biggest falls. - Member since 2022 · 485 posts · 216 votes3y
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Regarding FL and the hurricane, do you have any data as to how many homes were destroyed? I saw one article claiming 5,000, but I didn't see a source for the data. According to this data: https://www.infoplease.com/us/...Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Quote from @Greg R.:
Quote from @Michael Wooldridge:
Since those comments the following has happened:
1) Carlos and other have posted data showing West Coast is dropping but not the East Coast.
2) Hurricane happened which destroyed lots of homes in Florida. It didn't look like that market as going to drop but it sure won't now.
3) Lay offs happening and yet as per September reports we actually lowered at unemployment.
4) Most important even in the bay area Inventory remains down. People are sitting in their homes with really low rates waiting it out.
Also lets be clear 1.5 appreciation next year from this years lows (which we will see over October-December). Is a nominal average increase. So no it's not a rebound it's just growth over 12 months (2023) from where we end in Q4. It's a very reasonable appreciation level and guess what if inflation is on track to reset it will probably match when they start lowering rates in the second half of 2023. Slight growth after housing and inventory stagnates.
The real problem here is that it's looking like it's a correction not a crash which some of us have been predicting. It's. also not much of a rebound when no movement really happens for 12 months or so but as rates change people will buy again or the 1.5% appreciation.....
there are over 7 million total housing units in the state. Florida is a massive state with a ton of homes. Even if ten times the amount that I saw earlier were destroyed (50k), that's about 0.7% of the total housing inventory in the state.
I don't have a stance on this one way or the other, just trying to understand where you're coming from.Busy work day today. so Last data I saw on the West Coast was 8,000 which is significant in that soutwest part of Florida (Fort Meyers). Q1 2021 they saw 6500 housing starts (which in itself was 35% year over year it's fastest growing area in FL). Lee County (Ft Meyers prime storm path) saw 2,000 homes all of last year built. When you talk about destroying a years worth of new construction it's significant. When you talk about the fact that there was already a shortage, folks that were using the west coat market will shift east coast on short term rentals (pushing up rent prices) and the construction will move west coast to rebuilt (which slows east coast build). This all has a domino effect.
It's not large enough on it's own to stop the market but it has a big swing when you talk about putting a larger crunch on a already low inventory market. ON top of that restrictions have gone up on insurance again. So some of that new construction will now apply to perfectly good homes that need new roofs to be insured or they won't be sellable.
Anyway domino effect. FL was never going to have a huge turn in my opinion but IAN just makes it even harder.Ummm, not seeing it that way, at all. I understand it's a significant event in the local housing economy (immediate and nearby areas), but 8,000 homes is 0.1% of the housing in the state. Literally one tenth of one percent of homes in the state. But this event has the potential to swing the entire state market one way? That would assume that all these people would turn into immediate buyers who are qualified, have the money, and can afford at current rates and prices... we all know that's not how it works.
On the other hand you have 7% rates that impact 100% of all finance home buyers. So, one event that impacts one tenth of 1%, and another variable that impacts 100% of finance home buyers. Affordability is the elephant in the room that we can't escape. Look at median home prices 1 year ago with rates from one year ago compared to median prices right now with the rates right now. It's a huge difference.
It's a massive stretch to to claim that the hurricane (as devastating as it was), is somehow going to keep the entire state housing market from a crash that it would have experienced otherwise.
If your position was that it wasn't going to crash either way, that's fine. But I respectfully disagree.
I think it's entirely likely that FL will crash. FL experienced a very high rate of migration with some of the highest inflated home prices in the nation. My position is that the areas that experienced the highest level of migration and home value inflation will have the biggest falls.Yep my position is FL wasn’t going to crash anyway and losing a years worth of new inventory in a segment of the state that had some of the highest new construction in the state is going to hurt.
I’ve said Florida is unlikely to experience a crash since the beginning. you are right they've grown dramatically. Where from? Well the Northeast. Which is also not losing home valuations due to strong incomes. Anyway and FL median home price is still well below most of the national: https://www.redfin.com/state/F...
So yes overall I’m not expecting Florida to contract and certainly not the way you are describing. And yes the hurricane makes it even less likely. But since I was only expecting a small adjustment anyway this just makes it less likely.
Highest inflated home prices compared to what? Thye are still below the median home price for single family homes…. Floridas growth is mostly honest come by. People relocating, actual real population growth. Given that they fall below the median I’m not sure why you would consider it a contraction market. Your argument on other parts of the country that people were just spending extra money is more logical but Florida was simple massive population growth that outpaced housing. And There values haven’t hit above the median like Portland, Bend, and some of those did. So I don’t see the contraction happening.
- Deland, FL · Member since 2017 · 2k+ posts · 1k+ votes3y
Up down
crash
No crash
doesn’t matter. There are always deals
been that was as far as I know for the past 40 years. Not bound to change - 3yBruce WoodruffPro MemberContractor/Investor/Consultant · San Diego / Phoenix · Member since 2021 · 12k+ posts · 15k+ votes
Quote from @Michael Wooldridge:
Also Florida gets about 25,000 people a year from California, expected to increase. The sun 'n fun, ocean and outdoor lifestyle make it an easy transition for those looking to go from Blue to Red. That's a quarter of a million people every decade.....it will have a definite impact on the housing market and prices...
